Why The MMORPG Subscription-Based Business Model Is Broken

Famed game developer and analyst Scott Jennings recently announced on his blog that he’s quit online game publishing giant NCSoft to join John Galt Games. His new home is the small casual game startup developing Web Wars, a sci-fi game played via a browser plug-in, where web sites themselves are territories to fight over. (Sort of RocketOn meets battle cruisers.) The move is a bit like a top Hollywood producer quitting the movie business for an obscure online-video startup; it’s such a big jump, you want to know why.

Known by gamers as “Lum the Mad,” Jennings is practically synonymous with the subscriber-driven MMORPGs that major game publishers still largely favor over free, web-based virtual worlds. But now Jennings says that business model is broken — “an arms race that few can even hope to compete in, much less win,” he says.

To fix the online gaming model, Jennings said some innovative thinking is required. “Embracing open source development, crowd-sourcing content, targeting different platforms such as the Web or mobile phones, all of these are valid,” he suggested. With few exceptions, however, game publishers have been unwilling to take risks. “They aren’t responding to the changing market because they don’t understand how to work things like web technologies into their current income models,” he said. “So instead they keep doing the same things– just more of them, and with higher budgets.”

Jennings points to the ballooning costs of MMORPGs — World of Warcraft is estimated to have cost $40 million to $50 million to develop, and while Age of Conan cost just $25 million, the game is having retention issues, largely because the budget wasn’t big enough, he says. By contrast, he notes, small companies produce low-budget web-based MMOs like Club Penguin and RuneScape that post far higher profits.

So with Jennings making the jump, I suspect we’ll see more developers following his lead. Especially if publishers refuse to evolve.